What Is Your Collateral Recovery and Replevin Strategy?
In another episode of our popular #AskaPro webinar series, shareholder Allen Reis was joined by shareholder Amy Clum Holbrook and attorney Stefanie Kempfer Collier to talk collateral recovery and replevin strategy. Whether your collateral is in the hands of your customer, a third party, or police authority, having a collateral recovery plan as part of your overall recovery strategy is vital. And now is the perfect time to prepare that strategy for 2024 and beyond.
To view the recorded/complimentary webinar, click here.
Now, we’re sharing the top takeaways from this interactive session!
What is the process once a person states they want to file a replevin and how long does it take to complete?
While not confined to auto loans, auto loans make up the majority of cases, so we’re answering from that perspective. The steps:
- Make sure you've got a really firm reason for default.
- Determine what your collateral is worth. Don’t forget to let your attorney know if you have prior repossession fees or if you have late fees. You may be entitled to those as well.
- Identify who has your collateral.
- Contact an attorney and be prepared to produce all documentation.
- We, as the debt collector, will send out a model validation notice in cases where you are seeking both recovery of the collateral and a monetary judgment.
We then have 40 days before the letter expires, during which time, we’re drafting all the necessary documents and organizing information. At the end of that 40 days, we can commence the legal action. From this point, various situations affect the process and timeline differently.
Defendants have different time restrictions to respond and depending on how they respond, the timeline shifts accordingly. Different states have different nuances and rules. There are a lot of variables, and detours can happen along the way. Watch the webinar for more specific timelines.
If we obtain a final order of replevin and damages and then find out the asset is in another state, could we domesticate the order in the other state and then go after the asset?
In general, yes.
Every state is required to give full faith and credit to the orders of the other states, so if you have a final order of possession and determine that the vehicle's actually in a different state, you should be able to obtain an exemplified copy of that judgment and transfer it to the other state. However, then you’re required to at least follow the procedure in that other state to execute that order by taking possession of a vehicle.
Is it absolutely required to wait 40 days if you're only filing a one-count complaint for possession?
If we’re talking about possession only, it's going to be state-specific. In Ohio and Indiana, for the most part, we’re not sending out the model validation notices for possession-only complaint cases, because we’re not asking for any monetary damages as part of that judgment.
At this time, there has been little guidance from the Consumer Financial Protection Bureau (CFPB) regarding whether or not a Model Validation Notice is required in replevin cases. We discuss this in greater detail in the webinar.
What's the general cost to file for replevin?
There are two components: the court costs and the attorney’s fee. In general, the total costs are in the $1,500 – $2,000 range. Our rule of thumb is that if your cost and fees exceed 10% of the amount that’s due, you’ll want to think twice about going through with filing. Also, remember that you don’t have to take back the collateral. You can just go after the monetary balance owed to you. We dive a little deeper into that idea in the webinar.
There was a robust chat for this question, where we also discussed whether or not the creditor can pursue the debtor for the cost of the replevin (the $1,500 to $2,000) in addition to what else is owed and whose responsibility is it to have the agent coordinate with the sheriff.
What do I need when I send over a replevin order?
Your attorney will need:
- A copy of your contract
- A copy of your title
- Payment history or reason for default
- Balance owed
- Location address of collateral
- The names of all interested parties
- Any repossession results
If you’re in Ohio, you’ll want to watch for special instructions regarding e-titles.
How do you take advantage of the call that comes in from the customer after the replevin is filed?
It’s so important to leverage this call. Defendants will either call with a request or make a proposal — regardless, your staff needs to be aware of the fact that the proceeding has started, be familiar with the loan, and be prepared on how that conversation needs to go.
As an organization, since you’ve decided to put forth the investment to file a replevin, deciding what you’re willing to do (or not do) to allow the customer to remain in possession of that vehicle is essential.
Be professional, calm, and specific. If the delinquency is so severe and there isn’t any other acceptable arrangement other than paying the loan in full, that’s the message you’ll want to send to the customer during this conversation.
You’ll also want to ensure your staff never promises to dismiss the replevin. Even when the customer has agreed to pay on the loan over time, with a final replevin order you retain the right to replevin the vehicle in the future if the customer or member defaults again.
Can I use a replevin action to also get a money judgment?
The answer depends on what state you’re in. Most states do allow for a two-count judgment where you can see monetary judgment and the replevin order at the same time. Some states require you to file a separate action. When trying to decide whether to file a one-count or two-count replevin, you’ll want to talk to your attorney about the pros and cons of each that affects cost and risk.
Bonus question! We’ve seen a lot of auto loans where liens are not perfected and the member ignores requests for a certificate of title to be turned over to the lender. What options do we have to fix the lien issues? This is a very common occurrence. Watch for the answer and the various scenarios we’ve recently encountered. It’s fixable, and there are solutions.
Are you seeing an increase in the use of replevins given the higher outstanding balances?
Without a doubt, yes. We’re seeing more dollars involved, much more valuable collateral involved, and consumers are under pressure to make larger payments over longer time periods. We're seeing increasing delinquency rates as well.
Deficiencies of $25,000 and $35,000 are not unusual anymore. Loans used to be 48 and 60 months, and now they’re 72 and longer. That’s a longer time to default. There are also fewer repossession companies in business, and the ones that are in business are under strict protocols. It’s an increasingly dangerous business, so more replevins are being filed.
Why are service and location so important?
Service and location are everything! In a replevin case, you need to serve the customer twice, once to perfect service on the complaint and then later to pick up the collateral. Your case cannot move forward without service. Time is of the essence, so we generally use a personal service to serve someone in person, which means we have to know where those people are located.
How can you get assistance for replevins on a military base?
The first action we’ll take is to find out when the loan was taken out, before or after the member joined the military. We’ll do this by performing a Servicemembers’ Civil Relief Act (SCRA) search. Certain protections come into play. There are nuances you and your attorney will need to consider. For example, perhaps the vehicle is on the military base but not by an active military member. We’ll try to get a volunteer surrender.
If the collateral is still outstanding after judgment, can I pursue other ways of recovery like wage garnishment?
Yes, if you have a money judgment. If you filed a two-count complaint, you have all the same rights as any other creditor who brought a monetary judgment suit. We have some cases where the defendant is claiming they don’t have the collateral or is hiding the vehicle, so we’re pursuing wage garnishment.
There are all different kinds of things you can do with your judgment, provided you have the location of your customer and/or the collateral. We even include the right to engage a locksmith to get possession. Watch the webinar for information specific to Ohio and Indiana and other ways we’re able to secure money judgments.
Bonus question! Are there additional requirements besides the person’s identity when the unit is located at a third-party address? The most common scenario we see is that a parent financed a child’s vehicle or when a repair shop is in possession. A third party can’t be sued for money, but they can be sued for possession — provided we have proof.
How do you handle recovery when the government, such as local police or DEA, has seized the vehicle?
This is a large answer because every statute that involves police authority taking possession of a vehicle and the circumstances under which the vehicle might have been taken or where it's being held will determine how or when you get it back. If it’s a federal agency, you’ll receive a package of instructions to follow.
While lien holders are always required to be notified, the law gets murky when it comes to who is obligated to pay the storage facility prior to that notification. Watch for more on that.
Should I just pay a repair shop that has possession of our collateral?
It depends. You’ll want to have the collateral inspected to see what it’s worth and if the work is worth paying for. If you can’t reach an agreement, notify your attorney immediately. Never pay for repair work that you haven’t seen. It comes down to whether or not it’s practical.
In Ohio, the lien holder has priority over the repair shop, but that’s not the case in all states. Still, because there are costs associated with taking that repair shop to court, it becomes a business decision. Whatever you do, don’t ignore it.
Our team is constantly monitoring this topic and more. If you have any questions, contact Al, Amy, and/or Stefanie at any time.
This blog is not a solicitation for business, and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
